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2.1 Management report on the Group Profile and and strategy Calculation of ThyssenKrupp Value Added (TKVA) TKVA – EBIT Cost of capital – Sales Capital employed x Costs WACC – Responsibility Every employee is measured against the sustainable success of the company. This includes adherence to compliance rules. – Leadership and culture In a modern corporate culture managers see themselves as role models and multipliers. For example, internal communication at ThyssenKrupp today is much more intensive than in the past. impact replaces the previous corporate program ThyssenKrupp best. It retains proven methods, tools, templates and processes, and builds on successful ThyssenKrupp-best approaches. One example of this is continuous benchmarking. To make the effects of impact transparent the program is integrated into our financial planning and reporting systems. With the introduction of the new corporate program the first-ever impact award was presented. The award is recognition for the three best measures under the corporate program in a fiscal year. First place went to Elevator Technology for the “Supply Management Efficiency Program”. Second prize was won by Steel Europe for the measure “Energy cost reduction and increased energy efficiency”, and third prize went to a Materials Services measure called “Establishing a central warehouse network for engineering steel”. Value-based management We aim to systematically and continuously increase the value of the company through profitable growth and a focus on businesses with the best development opportunities. For this we use a value-based management system. Key elements of this management system are integrated controlling, value-based performance indicators, and value-increasing measures. Integrated controlling secures Groupwide transparency We use an integrated controlling system to manage the activities of all areas of the Group. It helps us identify and bridge operational and strategic gaps between actual and target performance. Our high-quality reporting and forecasting systems connect strategic and operational elements in real time. The performance indicators are also used to calculate the variable components of management compensation. ThyssenKrupp Value Added as a value-based performance indicator The central performance indicator for our value-based management system is ThyssenKrupp Value Added (TKVA), which measures the value created in a period at all levels of the Group. It is calculated as earnings before interest and taxes (EBIT) minus cost of capital. Cost of capital represents the expected return on equity and debt. The weighted average cost of capital (WACC) is calculated on a pre-tax basis and is made up of the weighted average cost of equity and debt as well as the interest rate for pension provisions. Capital employed is defined as invested assets plus net working capital; it is the amount of capital tied up in operations. 54
Management report on the Group 2.1 Management report on the Group Profile and strategy Page 56 54 | 55 Increasing value through growth, efficiency, capital employed TKVA can be increased using three levers: profitable growth, higher operating efficiency, and optimized capital employed. A major contribution to profitable growth and thus to the value of the company is made by investment projects that generate returns higher than their cost of capital. Higher operating efficiency and optimum capital employed are also aims of the new impact program. With it we will increase EBIT, reduce net working capital and so sustainably improve TKVA. The results of the analysis of the performance indicators feed directly into portfolio management. Group management decides which businesses are to be expanded to realize set TKVA targets, and which activities we should withdraw from in a timely way to protect value. Value-added impacted by impairment charges In calculating TKVA we applied the new definitions of EBIT and capital employed for the first time from 2010/2011 and adjusted the prior-year figures. In the past fiscal year ThyssenKrupp generated highly negative value-added of €(2,962) million. This was caused by the high impairment charges in the Steel Americas and Stainless Global business areas, which weighed heavily on EBIT of the ThyssenKrupp Group. In addition, average capital employed increased yearon-year by €2,456 million in 2010/2011, mainly due to the major investments in the Steel Americas and Stainless Global business areas. The value-added figures of the other six business areas were strongly positive and in most business areas were considerably up from the prior year, mainly due to higher earnings. Details on the value-added ratios are shown in the table below. Components of ThyssenKrupp Value Added (TKVA) EBIT (million €) Capital employed (million €) 2009/2010 2010/2011 WACC (%) TKVA (million €) EBIT (milion €) Capital employed (million €) WACC (%) TKVA (million €) Change TKVA (million €) Group Thereof: 1,346 20,767 8.5 (419) (988) 23,223 8.5 (2,962) (2,543) Steel Europe 731 5,370 9.0 248 1,133 5,822 9.0 609 361 Steel Americas (600) 5,678 9.0 (1,111) (3,145) 7,416 9.0 (3,813) (2,702) Materials Services 463 3,179 8.5 193 478 3,430 8.5 186 (7) Elevator Technology 646 2,307 8.0 461 801 2,243 8.0 621 160 Plant Technology 401 365 9.0 369 506 245 9.0 484 115 Components Technology 252 2,647 9.0 14 543 2,796 9.0 291 277 Marine Systems 145 1,174 9.0 39 213 1,334 9.0 94 55 Stainless Global (57) 2,948 9.0 (323) (785) 3,356 9.0 (1,087) (764) The TKVA of Stainless Global in 2010/2011 includes an impairment charge of €510 million in accordance with IFRS 5. The TKVA of Materials Services in 2010/2011 includes an impairment charge of €48 million in accordance with IFRS 5.
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Annual Report 2010/2011 At the cent
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Our mission statement We are Thysse
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Engineering

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